In Re: Adam S. Thiessen

Background

This was an appeal from Adam S. Thiessen’s Chapter 13 bankruptcy case. Andrew Molbert, an attorney, filed a bankruptcy claim for $136,214.67 against Thiessen. The claim consisted of $84,204.87 in unpaid legal fees and expenses and $52,009.80 in interest.

The fees arose from Molbert’s representation of Doreen Kendall in a custody and child-support proceeding. Before the trial, Molbert had Thiessen and Kendall sign draft affidavits of confession of judgment. The drafts contained blank sections for information including the judgment amount, the filing court, and the notary’s signature and seal. Molbert did not notify the opposing party in Kendall’s proceeding and did not obtain approval from the Family Court.

Thiessen objected to Molbert’s bankruptcy claim. The Bankruptcy Court sustained the objection and later disallowed and expunged the claim, concluding that Molbert failed to comply with 22 New York Codes, Rules and Regulations section 1400.5 and therefore could not recover unpaid fees. Molbert appealed.

Issues and standard of review

The district court treated the appeal as presenting legal questions rather than disputed factual findings. It therefore reviewed the Bankruptcy Court’s legal conclusions independently, without deference.

The issues were whether the signed draft affidavits were executed confessions of judgment and whether Molbert failed to comply with section 1400.5.

Confessions of judgment

The court held that the signed drafts did not satisfy New York Civil Practice Law and Rules section 3218(a). That law requires, among other things, an affidavit signed under oath before a notary, the amount for which judgment may be entered, authorization for entry of judgment, and statements explaining the debt or contingent liability.

The drafts did not contain the required completed information, were never properly notarized, and were never filed or used as the basis for a claim or lawsuit. The district court therefore concluded that the Bankruptcy Court erred to the extent it treated the drafts as executed confessions of judgment.

Violation of the domestic-relations attorney-fee rules

The district court nevertheless upheld the Bankruptcy Court’s ultimate ruling. Section 1400.5 requires an attorney in a covered domestic-relations matter to satisfy three conditions before obtaining a confession of judgment or another security interest for fees: the retainer agreement must allow the security interest, notice must be given to the other spouse, and the court must approve the security interest after an application for counsel fees.

The retainer agreement satisfied the first requirement because it allowed a security interest that could take the form of a confession of judgment, promissory note, or mortgage. Molbert did not satisfy the other two requirements: he failed to notify the opposing party and failed to seek court approval before obtaining the signatures.

The court held that these requirements apply before an attorney obtains a confession of judgment, even if the document ultimately fails to qualify as an enforceable confession of judgment under section 3218(a). Because Molbert failed to comply with section 1400.5, he was barred from recovering unpaid fees as a matter of law.

Disposition

The district court affirmed the Bankruptcy Court’s decision in its entirety. It directed the clerk to close the case.